Team Effort Acheives Fifth Record Performance

Media Release 17 July 2003

Combined Team Effort Acheives Fifth Consecutive Record Performance

ZESPRI Group Limited, the world’s largest marketer of kiwifruit, has reported its fifth consecutive record performance, achieving net sales revenue of $860.0 million ($800.4 million) and 100 per cent growth in net profit after tax to $14.4 million ($7.2 million) resulting in earnings per share of 68 cents (34 cents) for the year ended 31 March 2003.

An outstanding market performance in Japan, well supported by strong returns in Asia and Europe, was a major contributor to the record return, along with favourable exchange rates – an advantage that the company does not expect to benefit from to such a degree in the coming years, Chairman Craig Greenlees said in the Annual Report released today (Thursday).

“Credit for this healthy performance must be shared between the partners in the orchard to market ZESPRI™ System - growers, who are the owners of this dynamic, world class business; post harvest operators and suppliers; and the global team at ZESPRI,” Mr Greenlees said. “Together this combined team is able to offer a unique choice to customers in 60 plus countries, consistently delivering superior quality, taste and service to be recognised as the world category leader. Together we are successful.”

Directors intend to declare a fully imputed dividend of 20 cents (seven cents) per share, amounting to $4.2 million ($1.5 million), to be paid in October 2003, an after tax return to grower-shareholders of 16.7 per cent of the $1.20 share issue price while company equity reached $35.2 million ($22.3 million).

ZESPRI Group Limited received a margin of $92.0 million from contracts with New Zealand kiwifruit suppliers. Costs for the year were lower at $75.4 million ($82.2 million). Onshore costs reduced by $10.1 million.

The company paid Supplier Returns of $520.3 million ($479.7 million) or 61% (60%) of the total sales of New Zealand derived fruit while all product pool returns recorded gains over the previous season on an overall higher average sales price for the season of $13.69 per tray ($12.22 per tray).

Average per tray returns were $8.51, $1.28 higher than the previous season while Orchard Gate Return, the measure that matters most to the industry, increased 15 per cent to an average of $33,685 per productive hectare for all products.

The Board continued to invest in commercial innovation with the focus on projects that enable revenue streams to be developed from exclusive offerings and the capture of unique intellectual property. In the year under review $5.7 million ($5.1 million) was committed to the ongoing commercialisation of ZESPRI™ GOLD Kiwifruit, enhancement of fruit quality, particularly the eating experience and increasing volumes available for sale at premium prices from across the portfolio.

The year under review marked a significant strategic achievement for ZESPRI. For the first time, kiwifruit was supplied on a continuous basis for 12 months. Key European retail and trade customers were provided with quality kiwifruit from growing partners in Italy during the New Zealand counter season and Chile at the very front end of the new selling season. ZESPRI Fresh Produce earned a net income of $1.3 million on sales of over 1 million trays, a reversal of fortunes following the previous year’s requirement for Kiwifruit International Limited to underwrite a loss of $0.14 million that ZESPRI incurred on this business.

ZESPRI’s other fledgling new business, Aragorn, recorded a loss of just over $1 million in its establishment year as it began identifying commercial processing and food industry partnership opportunities.

Mr Greenlees said Aragorn was a long term investment and while plans were in place to incrementally improve the business unit’s financial position, it was not expected to achieve profits in its first few years.

Looking to the future, Mr Greenlees said ZESPRI must always work in the best interests of grower-shareholders, ensuring that the business is fit to compete and will endure through seasonal or cyclical fluctuations.

“The key to long term success is to continually nurture and extend the effectiveness and efficiency of the integrated supply and delivery system with its single point of market entry. At the same time we must constantly strengthen structures and supply partnerships at all levels of the industry and enhance production, marketing and innovation capabilities.

“Transparency in production, delivery and performance is a goal we must work together as a team to achieve. We have a privileged position and a unique competitive advantage through the single point of market entry. We must never take that privilege for granted, but earn our passage through integrated, transparent production systems, relationships and performance reporting,“ he said.

The industry is about to celebrate its centenary in 2004. Its heritage sprang from a scattering of kiwifruit seeds brought back to New Zealand from the banks of the Yangtze River in China and subsequently cultivated by nurseryman, Hayward Wright. Now, almost a century later, Hayward Kiwifruit is an every day product around the world. It was New Zealand growers who pioneered the commercialisation of this new product last century and in the 21st Century it has been New Zealand growers once again who have brought the world its newest fruit - ZESPRI™ GOLD Kiwifruit.

“The extraordinary success of ZESPRI™ GOLD Kiwifruit must be acknowledged,” The Chairman said. “In just five years this exclusive, new, sweet-tasting kiwifruit has become one of the top three New Zealand horticultural export earners, after ZESPRI™ GREEN Kiwifruit and apples. Its commercialisation is not only testimony to the entrepreneurial spirit of growers – and scientists – but also a unique example of how to take a promising cultivar, commercialise it through promotion and partnerships, and importantly protect the intellectual property for the benefit of the pioneer investors and producers, New Zealand growers, and for the nation.”

The success of ZESPRI™ GOLD Kiwifruit was honoured by Trade New Zealand in the 2002-2003 Export Awards. ZESPRI proudly accepted the Food and Beverage Exporter of the Year Award and the Supreme Exporter of the Year on behalf of the industry – “a tribute to a winning team,” Mr Greenlees said.

ZESPRI Group Limited Performance 2002-2003

- Net Sales of $860.0 million, up 7.5% with particularly strong performance in Japan, backed up by European and Asian sales and favourable exchange rates

- ZESPRI Group Limited net profit after tax up 100% to $14.4 million

- Intention to declare a dividend of 20 cents per share for grower shareholders

- Earnings per share of $0.68, double 2002

- Increase in Supplier Return of 8.5% to a record $520.3 million

- Average Orchard Gate Return for all products $33,685 per production hectare, 15.0% higher than the previous year

- Gains for all product pools:

- ZESPRI™ GREEN Kiwifruit $8.25, up 15.4% on 12.8% lower volumes

- ZESPRI™ GOLD Kiwifruit $10.46, up 11.5% on 56% higher volumes

- ZESPRI™ GREEN ORGANIC Kiwifruit $10.15, up 23.8% on slightly lower volumes

- Total volumes supplied down 6.2% to 62.2 million trays

- ZESPRI™ GOLD Kiwifruit becomes New Zealand’s third largest horticultural export after ZESPRI™ GREEN Kiwifruit and apples

- First year that ZESPRI can claim year-round presence with 1 million plus trays of counter-seasonal supply successfully sold

ENDS

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